A view of the nickel electrolysis workshop at Kola Mining and Metallurgical Company (Kola MMC), a unit of Russia's metals and mining company Nornickel, in the town of Monchegorsk in the Murmansk region on February 25, 2021. Photo: VCG

Nickel prices have surged and caused serious damage to the global nickel market and related upstream and downstream industries, the China Nonferrous Metals Industry Association said on Friday, following an unprecedented rise in global nickel futures at the London Metal Exchange (LME).

In just two days on March 7 and 8, the LME nickel futures surged 174 percent. This was followed by the rare announcement that all nickel trading on the 8th would be cancelled and not resumed before Friday.

The current nickel price has seriously deviated from the fundamentals and lost its guiding significance for spot prices, the industry association said.

The association pledged to ensure the supply of bulk commodities, and closely follow the industry's operating situation.

The nickel price fluctuation came amid widening Western sanctions against Russia, including excluding Russian banks from the SWIFT international payments system. Given that Russia's nickel ore accounts for 11 percent of the global supply, and its pure nickel accounts for 20 percent, the impact is not surprising, analysts said.

Nickel is a key raw material for the production of stainless steel and new energy batteries, with the latter being an important item in countries embracing green development, especially China, where new energy vehicles have become a pillar industry for low-carbon transformation.

The Shanghai Futures Exchange suspended trading in some nickel contracts for a day starting from the evening trading session on Wednesday, in response to speculation after the global price fluctuations.

Many international traders are also keeping a watchful eye on the situation. Analysts said that upstream companies are less willing to take new orders, while downstream industry participants are looking at contingency measures to cope with the potential supply shortage and price rise.

Tesla China's official website said on Thursday that the prices of the Model 3 high-performance version and the Model Y long-range and high-performance version had gone up. The rise was about 10,000 yuan, according to media reports.

The current domestic Model Y high-performance versions use ternary lithium batteries, which contain nickel-cobalt and other precious metals, the report said.

While there has been no confirmation about whether there is any direct connection between the Tesla price rise and that of nickel, analysts believe the nickel price jump could be a factor.

Regarding the rising costs of raw materials, Chinese battery giant Contemporary Amperex Technology, a major supplier of batteries for Tesla, told Securities Daily that the rise in upstream raw material prices has put pressure on the cost side and they are actively expanding the industrial chain while strengthening the cooperation with upstream and downstream partners.

Domestic nickel inventories are low, at around 10,000 tons, Wang Yanqing, an industry analyst with China Futures, told the Global Times on Friday, noting that they could run out in less than a month if the situation doesn't change.

"But one should not be overly worried about this, as things may change after the LME resumes trading," Wang said.

Moreover, the expansion of the cooperation and investment with Indonesian nickel partners could also ease the supply chain problems, analysts said.

In 2021, Indonesia became the world's largest nickel producer, which was the result of a combination of Chinese technology and capital with Indonesian resources, according to the industry association.

"Indonesia's nickel ore resources are very important to the global supply chain, including the Chinese market, given its rich resources and effective cost control in mining and transportation," Gu Fengda, an analyst with Guosen Futures, told the Global Times on Friday. Domestic industry players can find deeper roots with Indonesian partners to ensure adequate nickel supply, Gu noted.

Global Times